The Impact Of Economic Indicators On Cryptocurrency
Impact of economic indicators on cryptocurrency
The growth of cryptocurrencies has been a remarkable phenomenon in recent years, prices fluctuating wild between days and weeks. While many people consider cryptocurrencies as a speculative market, there is an increasing body of evidence that suggests that the economic indicators used to evaluate their value can have a significant impact on their price movements.
In this article, we will explore the relationship between economic indicators and cryptocurrency prices and examine some key trends that suggest how investors can use these factors to make the knowledge of what cryptocurrencies to buy or sell.
What are the economic indicators?
Economic indicators are values that economists use to evaluate the economic health of a country or market. These include indicators such as GDP growth rate, inflation rates, unemployment rates, interest rates and more. These values help the decision makers and companies understand the direction of their economy and make the knowledge of the case.
How does economic indicators affect cryptocurrency prices?
Cryptocurrencies are based on a decentralized system in which transactions are recorded on a public register called blockchain. This technology allows peer transactions, without the need for intermediaries such as banks, which can facilitate money laundering and other illicit activities.
However, the basic economic indicators used to measure cryptocurrency prices do not necessarily reflect the value of a certain cryptocurrency itself. Instead, they influence the general feeling of the market and the confidence of investors.
Here are some key ways in which economic indicators affect cryptocurrency prices:
- GDP growth rate : A strong GDP growth rate may indicate a robust economy, which leads to a higher demand of cryptocurrencies (BTC). In contrast, a slow growth or lower -level increase rate can lead to lower prices.
- Inflation rate : High inflation rates can erode consumer buying power, reducing cryptocurrency demand. Low inflation rates, on the other hand, suggest that the economy increases slowly and could benefit from higher cryptocurrency prices.
- Unemployment rate
: A low unemployment rate may indicate a strong labor market, which can lead to higher investors trust and, consequently, to higher cryptocurrency prices.
- Interest rate : Interest rates changes can affect the demand for cryptocurrencies such as Bitcoin (BTC). Higher interest rates can reduce demand, while lower interest rates can increase.
Examples of economic indicators affecting cryptocurrency prices
- 2020 Global Covid-19 Pandemic
: The pandemia led to the widespread blockages and economic contraction, which led to a significant decrease in cryptocurrency prices.
- 2018 The US-China Commercial War : The US and China commercial war led to Chinese imports, which negatively affected global markets and affected cryptocurrencies (BTC) and Ethereum (ETH).
- ** 2019 Global Economic Slowing 2019
Prices of feelings and cryptocurrencies
Investors’ attitudes towards cryptocurrencies are also influenced by economic indicators. For example:
- Sentimelic analysis : Investors use feelings analysis to evaluate public opinion on cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH). The strong positive feeling can lead to higher prices, while the negative feeling can lead to lower prices.
- Institutional investments : Institutional investors such as speculative funds and pension funds have a significant impact on cryptocurrency markets. Often they closely respect the economic indicators, which can influence their investment decisions.